No globalization without representation

ByHelena CobbanMarch 9, 2000

CHARLOTTESVILLE, VA.
— Should a European, an American, or a Japanese national be named the new head of the International Monetary Fund? Disagreement on this is now roiling the IMF's generally staid Washington headquarters.

But behind this immediate power tussle lie generally unasked - and much more serious - issues of governance and accountability.

Why should governments in the rich world still dominate the decision-making in the IMF and its sister organization, the World Bank?

Can't we work for a new system in which these bodies make the eradication of global poverty their foremost aim - and one in which they become more directly accountable to the world's poorer communities?

True, the purpose of the IMF when 39 member-states founded it in 1946, was to provide financial stability for a still-chaotic global trading system. And it succeeded brilliantly. Its interventions forestalled any return to a long, 1930s-style, global Depression. As a result of that success, the IMF's roster of members now totals 182 nations, including Russia, China, and most other members of the United Nations.

The newer members bring in a new set of challenges for the organization. But its mission and system of governance remain essentially those of 1946. Both now need a drastic overhaul.

Under IMF rules, each member bears votes in accordance with a "quota" that is assessed roughly in proportion to its share of the world economy. Thus the US carries 17.4 percent of IMF voting power, while states with tiny economies carry a fraction of 1 percent.

The finance ministers of all IMF states come together in a huge annual meeting, held each April in Washington, to determine broad policies. Betweentimes, all IMF decisions are made by a 24-member executive board, in which only the US, Japan, Germany, France, the United Kingdom, Saudi Arabia, Russia, and China have permanent seats. The other member states are formed into 16 groups, with one representative of each casting the proportionalized votes of all group members in board decisions.

It is this board that is now trying to reach agreement on a new IMF head.

Traditionally, the IMF chief has been European, while the head of the World Bank has been American. But now, the Clinton administration opposes the candidate favored by most Europeans, Germany's Caio Koch-Weser.

President Clinton has said he still favors the nomination of a European head other than Mr. Koch-Weser, but many in the US and elsewhere favor promoting IMF deputy head Stanley Fischer to the top job, instead. And Mr. Fischer is an American.

The board has generally preferred to make such decisions by consensus. This time, consensus looks hard. In a straw poll March 2nd, Koch-Weser received the largest share of voting power, trailed by Fischer and Japanese candidate Eisuke Sakakibara.

European Union countries carry about 25 percent of IMF voting power, and EU heavyweight Germany has dug its heels in over Koch-Weser.

The saga continues.

Doesn't this all look like a cozy rich man's club? True, the US, Europe, and Japan may have ponied up most of the IMF's original investment. But these countries are all sitting comfortably atop the world's economic ladder. Surely, people in rich countries would have little to fear - and much to gain - if the World Bank and IMF now shifted their focus more to eradicating the poverty that persists, and worsens, in so many other countries.

The IMF's role in this would be, while maintaining general global stability, to provide special help in restructuring the finances of countries working seriously on poverty eradication and long-term growth.

Shouldn't the needs of such "special case" countries be better represented in IMF decisionmaking? Isn't the present system of votes weighted according to existing wealth an overly status-quo-preserving system?

Why should it still be impossible for an able financier from the developing world to bring a new, poor-world vision to the leadership of the IMF?

Even the UN, for all its failings as a model of democracy, rotates its leading post among the different regions of the world.

Surely, with the "free market" system in secure command of the world economy, it is now time to open up the IMF and the World Bank to a saner global vision, and a much more representative and accountable system of governance.